[Solution] Pharmasim Case Summary Essay

Executive Summary

As the brand manager for Allround cold medicine, there were many decisions regarding product formulation, strategy, line extensions and product launches over the company’s last 10 periods. The brand was focused on remaining a profitable, mature product family within the cold medicine category, but also maintaining a premium brand image.

ALAN’S INITIAL STRATEGY. Please add, it should only be around 1 paragraph.

After a period of declining sales for Allround, we increased the advertising budget to be consistent with our competitor’s budget.

We decided to be very consistent with our strategy over the ten periods; however, in hindsight we should have implemented a more dynamic strategy that factored in the changing preferences of our target segments, cannibalization from Allround, and channel relationships. After the ten periods, we had a lower stock price than most competitors, an average cumulative net income, and average cumulative manufacturing sales. The high net income is attributable to the fact of Allright’s high margins, accounting for a growing part of our sales.

We often saved part of our budget that could have been used more effectively to boost sales and therefore the stock price. Looking forward, we will change our product mix and pricing to better target specific cold relief usage to alleviate the cannibalization from Allround and to provide a complete cold relief product portfolio. This will be accomplished by reformulating Allround to be used for nighttime cold relief with Allright becoming the daily cold relief medicine. Additionally, Allround+ will continue to focus on children’s cold relief. A new allergy relief product will be released in order for AllStar to venture into this market.

General Strategy

Our general strategy was based on our desire to increase: sales, stock price, and net income. This was achieved by realizing that AllStar was the premium brand on the market, and our pricing, promotions, products and place should reflect that. We created a strategy whereby AllStar’s products could specifically target different segments so that each product matched the benefits sought be each target segment. This was done by pricing Allround and Allround+ as a premium product because our target markets were the least price sensitive. Allright was then priced at a lower cost to reflect the price sensitivity of its target market. As a whole, we wanted the AllStar brand to be viewed as providing the highest promotional support as well premium advertising for its products. This was accomplished by providing a large sales force for each channel, and, where effective, a high co-op and point of sales budget.

Product

The Allround product is the leader in the over-the-counter cold remedy market. It is a 4-Hr liquid cold medicine that focuses on treating the five basic symptoms of a cold. These include: aches and fever, nasal congestion, chest congestion, runny nose, and coughs. While Allround is an all-in-one product that can treat most cold and allergy symptoms, however, our customers base typically purchase Allround for cold relief and is typically taken at night due to the strength of the medication and because the alcohol and antihistamine help the patient rest.

We decided to drop the alcohol from Allround because drowsiness due to antihistamines or alcohol was the most often mentioned negative side effect, especially when used during the day. We believed that dropping the alcohol would increase consumption during working hours, and thus, would increase sales of our product. By dropping alcohol, parents felt more comfortable giving Allround to their kids. This decision was successful, as sales increased in both of our target segments (young families and mature families).

We decided to not reformulate Allround, as we believed the product composition suited our target audience. Also, as we focused Allround as a cough suppressant, adding expectorant would not have matched the desired image of our product.

In period four, we introduced the line extension Allround+; a children’s 4-Hr cold liquid. We decided this extension would be successful, as it would cannibalize of Allround sales the least. Even though the alcohol was dropped from Allround, doctors and pharmacists recommended expectorant in the children’s version over the cough suppressant in Allround. As a result, our product choice was successful.

In period five, we introduced the line extension Allright; a 12-Hr muli-symptom relief capsule. We decided this extension would be successful, as the allergy market is very small and had an entrenched competitor. Therefore, while we were aware of potential cannibalization, we believed that the targeted market (retirees, empty nesters, and young singles) would have sufficient demand for our product. We also reasoned that this target was far enough removed from Allround’s to gain additional market share without taking any from Allround. However, this was not the case, as cannibalization was a pressing issue. Market share was gained at the expense of Allround.

Price

The AllStar brand was viewed as the premium brand on the market, this was reflected by the pricing schemes of Allround and Allround+. However, Allright was launched to be a flanker brand to capture market share from price-sensitive consumers without hurting Allround’s brand image. Allround and Allround+ were priced as high as possible within the bounds of the price-effectiveness trade-offs. This trade-off was also the basis for Allright pricing decisions, however, we could never increase the price fast enough to align with the product’s effectiveness to the targeted segment. The general pricing strategy was influenced by the fact that Allround was the market leader, and thus we demanded a premium price for the product at all times. The group decided not to let the price of other products affect our pricing; as the market leader we must lead the market.

As such, our price increases were based partly on inflation, but more importantly, on the perception of the various products’ price compared to its effectiveness. As such, from period 4 onward, we consistently increased the MSRP of Allround. We followed a similar tactic with Allround+, as we wanted to ensure a consistent image for AllStar. Our group was initially hesitant to increase Allround+’s price, out of fear of reduced sales, however, we eventually decided to follow the same strategy as Allround. We decided against charging the highest price, compared to our competitors, as it was not viewed as being effective enough.

Originally, the Allright pricing scheme was set lower than Allround’s as the target demographics were more price sensitive. Allround would be positioned as the premium priced product, while Allright would be priced lower to match its lower-perceived effectiveness. It was launched as a flanker brand to protect Allround’s premium brand perception, whilst gaining additional market share in the cold medicine market. However, we were not able to match a high enough price for Allright’s effectiveness to our target segments. The target segments were not as price sensitive as we perceived, as they bought Allround anyways due to its high effectiveness.

The group created a discount strategy to promote larger sales orders. This was achieved by giving the ‘<250’ the smallest discount, with a significant discount increase for orders <2500, providing a reasonable incentive for customers to place larger orders. This tactic was effective, as sales increased within the ‘<2500’ category at the expense of the ‘<250’ category. However, the ‘<250’ customers eventually complained that their discount was not high enough.

Place

So much stress and so little time? We’ve got you covered. Get your paper proofread, edited or written from scratch within the tight deadline.